The Importance of Billing Accuracy

Welcome to Accountants Law Pod, where accounting professionals and law firms converge. Hosted by Lynda Artesani, Sarah Prevost, and Stephen Libhart.

Well, welcome back everyone. It's been a minute since we've all been together traveling, doing different things.

Oh my gosh, we've been all over the map, haven't we?

Yes, we have. We've all been traveling, I think, at some point.

And you're traveling again.

Yeah, just a short one, little quick one down to San Francisco for Gusto. But yeah, we have a topic today. It is the importance of billing accuracy. And I think this topic is great. We can get into it here in a minute, but we did have a couple questions from listeners, one of which does somewhat fall into this a slight bit that we can address here. So The attorney said he did not know that there was an accountant error when a check was canceled through the settlement funds of the admin QSF, and the check was canceled for a stop payment, but the client was never notified about the issue. So how— Lynda or Steve, how would you like to sort of address this one?

Well, Go ahead, Lynda.

No, I was just going to say, so the law firm wrote a check and then the law firm stopped payment on it?

That's the confusing part, I feel, of the question because the settlement funds from the admin, the QSF, so that would be the trustee that issued the check. So it sounds like, I think the part I'm confused about, Lynda, like you're saying is Did the settlement funds initially— is that the portion that got canceled and no one communicated?

Right.

That's how I was reading it.

Yeah, because you think about it, Sarah, we work with an estate planning firm that has a lot of trusts that they handle. And yeah, you know, all sorts of crazy checks go out. But, um, and then there's funds that are sent out when the court says it's okay to send them out and approved. And it sounds like maybe, maybe that was the problem. It was processed and then, like, they got the approval, but then they didn't get the— or maybe somebody didn't check to make sure they had the approval, so they hurried up and stopped the check.

Mm-hmm. Could be.

And then they sent the check out, and it was stop payment, and the client wasn't notified. So I'm envisioning the client cashing the check and then finding out it wasn't any good, which is definitely a problem.

Yeah.

For law firms. I don't know. I mean, there's not enough information on the question to really be able to answer it. And never mind the fact that if you had an issue like that where there was this internal strife within your firm and a fund went out that ended up having a stop payment. You should have communicated with the client, like, oh, no one told the client. You really should have the communication with the client right there, why it happened.

Yeah.

And then, 'cause you wanna keep the client transparent when you're dealing with trust funds. And then if you didn't, and then now maybe they're going after the law firm because it was done poorly. I mean, I'm sure they were out money for a deposited check that bounced. It sounds like there's an issue there, but then you really have to make good for that client if that happened because you didn't notify them that you stopped the payment and they shouldn't have cashed the check.

Yeah, because where's the communication between all three parties essentially?

Exactly.

Who issued the check, the check's being approved and issued from, who's the line of responsibility? To me, it's whoever that, wherever, who decided to issue the stop pay. Is your responsibility at that point to have some written documentation. And how to address this would find out— I think I'd find out where the first part of the problem was, who issued the stop payment and why communication stopped. And then I would say if there's a conflict from there, that would be a bar. You need to go to the bar, right? You need some assist— I mean—

Get their advice.

Yeah.

Yeah. Well, and you used the letters QSF. So for everybody listening and watching that may not know what that is, that's Qualified Settlement Funds, which is regulated by the US Treasury to temporarily hold money for a legal dispute. So it's a little bit different than a lot of the funds that we're used to working with in trust environments.

Exactly.

Read up on those whenever you come across a QSF and how they're regulated.

Yeah.

And why they're regulated the way they are. And it looks like, from some research here that some of it has to do with liens until liens are resolved against it and things like that. So I agree in this particular situation for the attorney, especially to protect themselves, to get their bar involved and say, this is what happened. What's your advice? Because it's akin to self-reporting when something happens, when something goes south to protect yourself.

Yeah. Yeah. So we did get another question. Thankfully, we're getting questions. I'm so excited about this.

Yeah.

This one is, I do feel, not really for us per se. This is definitely probably guidance to what both you and Lynda are saying about bar guidance, but it is a question, so I'll ask the question. Conflict checks. What if you are working with a firm and they are an attorney for Jane in Jane versus Joe, and then another attorney wants to hire you, but they represent Joe? During that time. The case is closed at this point, but the attorneys litigated against each other before. I— that part, the litigated against each other before, that I don't follow that because conflict checks results in the individuals, but that's not an us question per se.

Like— No, we don't deal with conflict checks usually. That's an internal law firm thing. Um, we don't deal with it other than we do deal with it when someone's doing a migration from one product to another, how much you want to bring in. And we often hear, well, I did need to do a conflict check, so I need all the names in from the last 50 years of this law firm being open. And then we have to go through, well, you still have access to the old software, especially if like it's desktop one, you can still go and search there. But yeah, how many years back do you want to pull it? And that's really the only time we've had to deal with conflict checks because we just— that's not part of the accounting tasks.

No, it's a software thing when you're— like you're saying, Lynda Artesani, or You know, it's an internal process. And I would say this would be a bar question to me.

One of my jobs in a law firm that I worked at was to look at the conflict checks when the new clients came along. It was an interesting procedure that we had to go through and software that we used and things like that. But we had a saying, when in doubt, vet it out.

Yeah, yeah.

And right there, if you've got the queasy feeling that, okay, there's a relationship here somewhere, it just didn't— we didn't bring the case in.

Mm-hmm, yeah.

But again, that's in our world, that's not really an accounting one. I wish we could be more in-depth for the person that's asking the question, and we thank you for it, but that's one that you want to go back to your bar with as well and look at the requirements for conflict checks in your jurisdiction and so on.

So swinging back to our topic about billing after, what if you ended up doing a consult on that And then realizing, like, what if that happened, right? So then you'd— that's a billing moment. You want a refund. Like, what if they prepaid kind of thing? Because a lot of people are prepaying for consults. And you'd have to do that conflict check for that, right? So it's important to— like, what we're all saying is software, having things in the software, having the due diligence, and then checking that. Okay, so importance of billing accuracy, which I think is an interesting topic because we have found of late— Lynda and I have found, we've been in a few files where, um, they're migrating data and they did it one way in one software and it's a little different in a different software. So you're learning that migration piece. That's one impact and why it's important to have some accuracy to it. And then I think what we said in the beginning, client communication on how you work is another big piece, but there are others. So what do you all have thoughts on? What do you want to contribute to this topic?

This is one of my passionate subjects for law firms is—

Okay.

Billing, because, um, you know, the minutia of the day, every day, is where they're Smokey the Bear stomping out the fires all day long. You know, you finish one task, you're into the next one. You finish that task, you're into the next one. The next client wants you to call them back. It's a busy, busy time being an attorney and trying to think of everything. My number one recommendation is don't start that next task until you document what you just did, whether it's a billable item or not. That's part of the accuracy in the policy arena that we're talking about. And you can miss so much money. You can set yourself up for exposure, bad exposure, bad decisions, things like that. When it's suddenly, you realize it's 6 o'clock at night, you want to go home, your brain is fried and you can't remember specifically what you talked about to Client Joe at 10 o'clock this morning.

Right.

That happens a lot, and especially with newbies.

Yeah.

You know, they're so anxious to help every client that they can and make that money that they need to make that they miss things. That's my pet peeve with billing is that's the basis starting right there.

To me, it's, for me, from my outside perspective, it's understanding the billing requirements depending on what type of billing. If it's flat rate, hourly, how are you gonna track it? What are the details? How does an accounting person support you? Oftentimes we see a lot of paralegals kind of doing this pseudo work, that's not the best place for them to be. It's a— it gets beyond them. It's critical. Like, are you doing hard costs, soft costs? Are you billing in a Leeds billing platform or not? That changes on the quick too. We've had—

That's a whole, whole nother world right there.

Exactly, right? Yeah. How easy is it for you to work within your software? Are you What's your billing cycle preference? Are you doing every other week for cash flow reasons or just for your own reason because that's what makes sense and it's easier for the clients? There are so many billable hours, like to your point, Steve, that goes into this admin work. Do you have the right tools to support you? Like you're saying, like the right note tool, note taker tools to support you with what kind of notes you need or what's the information you're going to follow through with. And then the other side of this whole thing is you do all this billing and then what? Are you collecting on it?

Yeah, that's the big piece we see with huge open accounts receivable. But also, like you said, this is where your software tools— we meet lawyers all the time. I don't want to spend all that money on software. Why do I really need it? And I mean, you do need it because you're going to— any missed time that you didn't bill, especially if you're billing with time, Or even if you're not billing with time, but you need to track it, that's important. And I think we see that a lot of times where the attorneys don't want to invest in the software and it pays for itself very, very quickly with that kind of stuff. So—

So true, because human error, right? Like—

Yeah, you just miss it. And we even have an attorney that has a software that works within Clio that monitors the email and picks up all the time that's spent on drafting emails back to the client.

I love that.

Yeah, I forgot the name of it, but he heard about it from somebody in court and we looked into it and sure enough, they do have it. So yeah, it's available. It's something you might wanna look into for sure.

That's a good point with AI these days. There's so much of that going on. I mean, look at, for those of you that use Google, look what came out in Google in the last few months where it summarizes it at the top of the email. Sarah said this, Lynda responded with that, Steve did this, and you get this summation of, everything before you even go back into the email to see what's going on. I love that. And to your point, Lynda, oh my gosh, that is a revenue generator right there.

Yeah, yeah.

Mm-hmm. Well, speaking of the AI, I'm sure that Duo inside Clio, just on that topic, will summarize the last task that you touched on. I know our practice management tool does some format of, you know, hey, you were in this file, You know, do you want to make sure you track time against it? Whether you bill it or not, it's just being able to have access to the unbilled times. We get a lot of firms that are like, "Well, I'm doing flat rate." Okay, that's great.

Great.

But we still track time. Okay, but do you understand how to work through those processes? Because that's, you know, like our preferred methods, like with LeanLaw and with Clio, both of those platforms have ways that you can handle it and see it, but not, you know, bill for it.

If you, if you are an attorney working with flat rates and you're not tracking your time, you still have scope creep just like every other attorney does, and you are losing money by not informing your client, hey, this is outside of our contract. I can either do this for you or I can't. Let's say that you're doing a divorce case on a flat rate for a client, and all of a sudden they say, hey, I really like the work you're doing, but my grandma just fell down and we need to talk about that. If you don't document all that time and show it as a non-billable item, creating value added to that client, you're shortchanging yourself.

Correct.

And you're not being fair to your client.

Okay, so one piece I wanna bring up that goes back to the original conversation, which is communication and eroding confidence and, you know, and trust with clients. When trust funds come in, how they get dispersed. Because oftentimes we hear this firsthand. The money's in. Okay, how quickly can you release it? Yeah. Do you have all your ducks in a row? Do you know that everything is like— all the expenses are in? What if, you know, accounting is behind? I'm not saying that that's what we're doing, but— or what if the paralegal hasn't been able to get to the workload that you gave her?

Well, and Sarah, to your point, to your point, Good point. When— here's what happens too. When a case is getting ready to settle and it's time for the trust disbursements, there's a lot of activity that accelerates in the firm.

Yeah.

And that's right there, when that money comes in, if it's, oh, I've got to get it to them tomorrow. No, no, no. Slow down. We've got to dot the i's and cross the t's here before we disburse those funds. And that's all part of billing.

Yeah. The other part too is we've, from our experience, Lynda and I can honestly say this, you have multiple trust accounts with multiple jurisdictions, different states and so forth, and you're still printing checks. Totally understandable because of the way you work, but you're not— you've got different payees, you've got— you're taking— you're coding things to the wrong trust accounts, you're coding things— you're not even recording, you hand wrote a check.

Right.

We've seen that.

Then we get the copy and we're like, oh, this is— it comes through the bank feed and we're like, what check is this? And you go look it up and you go, I can't read this writing. Who'd they write the check to?

Yeah, that's the other problem too, is writing. So like, big picture is, first off, do you have all the right things in the right place with the work scope and the timelines? And what is your jurisdictional timelines? Like, I know for us we have like a 3, 7, 10-day rule. There's like a whole series of things we like to take the extra precaution because we have seen money come back out, money get canceled. To our, our listener's question, a stop payment occurred unbeknownst to you. And what if that causes you to overdraw that trust account? Because that trust account was meant for only that style of it, of funds. You know, sometimes the type of accounting you have to do for trust is specific to the type of work it is. So if it's a QS, maybe that is a dedicated trust account specifically for that. There are so many things that could go into it, and it go— again, it goes back to, uh, uh, sequence, scope, and technology. I feel like you really have to have good processes in place and make sure your stuff is reconciled and complete. So you're safeguarding your firm. Honestly, I, as far as any of that goes for trust, it's to me, it's always, it's hard when a firm comes back and says, oh, we forgot to bill the client for X. We forgot there was a lien on this.

Mm-hmm.

You're, that's, that's it. You've dispersed. It's done.

That's the problem. Then they can't go back. I mean, then that's a loss to the firm.

That's a loss to the firm. Yeah.

So avoid that. Just kind of like anything else, even like advanced client costs, you should be reconciling that because again, the same thing.

Reconcile it against that bill.

Yeah. Ignore it. It's an in and an out. And if there's no, no in or no out, there's an issue and you need to fix it. So it's something that gets missed a lot. We see in files, you know. We actually had a file the other day though, Sarah, and I'm like, hey, this is actually pretty clean. We still never thought we'd see one. It was kind of like an anomaly. It's like, this is actually not bad.

Yeah, it had a few things that were needed to be minor, you know, in, in grand scheme of what we've seen. And, um, there was one though that we saw this week that we were very confused about. We all saw last week, it was where there was the advanced client cost, to your point, Lynda, and the way the firm was choosing to handle client expenses and get themselves paid back and so forth and so on. It was very—

Oh, yeah, yeah.

I know what you mean. I would say at the— like, it just wasn't as clean. And bottom line was, well, Ultimately, when you're having these advanced client costs and you determine what is a hard cost specific to your firm, and that involves your engagement letters too, so clients are aware anything above a certain dollar amount is considered a cost that we will get recouped for, um, that we're advancing on your behalf versus a little postage stamp, you know, or some people charge— Uh, still, I see this a lot, especially with court. I see parking charges go out. Those are not soft costs. I see those in there as hard costs to clients.

You know, I ask that question a lot to clients. Is this a firm expense or a client expense? Are you passing it through to the client? Are you eating it? Parking is one of those nemesis accounts.

Yeah.

But I see— Don't get me started on that topic.

Well, I mean, you also have those subscription things, right? So you pay for LexisNexis or Westlaw or something like that. And then you do further research. And if you incur more fees for things, like, how do you want to consider that? I see different style of charges for stuff like that. So it all falls into this whole big picture of being accurate in your billing and accurate. It sounds weird, but Lynda and I will sometimes ask, what's in your engagement to a client? Not because we want to get in your business, but we want to know.

What'd you tell your client? What's your agreement?

Yeah.

Are you even tracking it the way that you've presented it to them? Um, the consults are another thing that we often see. A lot of people don't want to track it by individual. They just want to track like, oh, I did so many per day. No problem. Sometimes we just go in and put all the details of what that one bill looks like, just all the different names, just so we have the names. And if they do get hired, then there's a whole process from there. So billing, I will say this in fairness to all those wonderful paralegals, very unfair to put them in those hot seats where you're so good at this, do the accounting for the firm, and they have to straddle those two jobs.

That's hard.

It's hard, right? And billing, you can have the smallest mistake. You could, I mean, there's a lot of things that could go wrong with billing at any point. You could have On LEED style, you could pull the bill together, send it out, find out that things got disallowed. You have to do a whole process that takes a lot of time.

It takes a lot of— That's a lot of Saturday afternoon work when a LEED bill gets kicked back.

Yeah, exactly. So I think in fairness to the staff and the team, just looking at the holistic picture and making sure that it's done right. And then who, like, Lynda, you have a process that you do with certain firms where they create the drafts, that means that you can bill. Otherwise, you create the drafts and then you're waiting for their approval to bill, right?

Yeah, we have it. And we have even in our firm and it's, you know, you send it out, you send out the message, okay, it's all in draft for you. And then you don't hear from them. And it's like, time's ticking away. And it was a big deal when they hired us that it had to be done on the 5th. And then, you know, here's the 15th and then they get busy and they're like, oh yeah, I'll get to that over the weekend. And then they do approve it. Well, LeanLaw, you don't have a way of knowing that unless you ask that it's done. You don't want to make assumptions and you just kind of have to put a reminder to ask about it. But sometimes they don't get back to you for a long time. And that was a problem with one of our clients. We had to keep going back and changing the invoice dates because we created the drafts on a specific date. Now you go send them out and then they're already due before they get sent, which isn't cool.

Yeah, that's not good.

No. So yeah.

That looks bad.

Yeah.

And then what about your cash flow for your business?

Exactly. Well, and there's lots, there's studies that have been done for millennia on as a bill ages because it's not sent out or whatever, or it was sent out and not collected, how much less money you're going to collect on that bill. In fact, I think way back in the day, Lynda, I remember you doing a video on that. I recall it.

I was told that by, I think it was, it might've been Matt from CoalBox. And he's like, once they get to this specific—

I think you're right, yeah, yeah.

There's, it's really hard hard to get paid for it.

And there's charts that show that it just goes up and up and up as far as your losses, you know, percentage of dollars you're going to lose.

Yep.

Mm-hmm.

Yeah. And then we always talk about this and we've had this as part of the billing. If it's not a settlement fund and those types of things that have to go through a certain way, if it's regular hourly billing, how are you accepting those payments? The friction of accepting payments if you're not doing credit cards, It's gonna age longer, cost you more, more follow-up, more admin time. And I mean, we're in a day and age where people just wanna use their phone. They wanna use their wallet on their phone to, to use it. They rarely carry actual physical cards.

Mm-hmm.

A lot of times. And so I really feel like we hear this a lot. It's gonna cost me more. You know what, it really doesn't in the end.

It gets you faster. That's right, it does not, it does not. And not to pick on the government, but with all the cuts in the government, it's taking forever for checks to get to people. And I've seen an increase in checks being lost.

Yeah.

They just disappear in the ether.

People stealing them or whatever, that's the other problem.

Yeah, the fraud, the constant, yeah. We do see on this topic, I know when you're doing your billing, we oftentimes see on the actual invoices you have your checking account information. Oh, don't do that. Or Zelle or something like that, another way of accepting funds. Do realize that workflow that occurs, how easy— who has access to look at the Zelle details? How easy is it for— is it all going to hinge on you as the you know, sole owner attorney, or is there ways for you to delegate that work out appropriately? So consider all of this stuff. It's part of billing. Um, to us, it's— we've been asked like, hey, can you do all this billing? And my question is, yeah, but who's collecting? That— sure, yeah, we can produce a lot of billing, but we see it as a whole job. We don't see it as one section of it. So, um, And what is the nature of how you want to follow up with people respectfully too? That's the other thing, sensitivity to communication. So this all goes back to the original questions we had, which is client communication for a lot of this stuff.

So, which is key because, you know, we meet bookkeepers that don't even talk to their client. They don't talk to their client at all. It's like, how do you exist with— it sounds like a dream, but I mean, you know, we like to keep working. It just seems so odd that you never speak with your client at all. You never have any communication with them. Even my little small ones from back in the day, my old legacy clients, I'm guilty of that. I don't talk to them very often, and it's like they're busy working, I'm busy working. I've been working for them for 10, 15 years. It's like, do I really need to interact? But I really should call them and sit down with them. It shouldn't happen December 31st or January 15th or whatever. It should happen at some point. That's the same thing, client communication for the Lawyers, same thing for us. We need to have conversations to know how things are going.

Yeah. So a couple things just as we wrap up, the couple things that we didn't really touch on that are in our little show notes is common mistakes attorneys make when recording billable hours. Steve, you sort of touched on this, but there are some pitfalls that we've seen. And then another thing too is the risk of double billing, which I think Lynda brought that up as a great way to say like, hey, if you don't get back to us and we can't bill, then we have to rebill and we've got a whole new month to bill. Yeah, you could cause a lot of discomfort and unhappiness. And there's a lot of people out there that are shopping. So this was good. This was a good topic. And thank you to our listeners who posted questions to us. This is—

So we're always open to questions.

Absolutely.

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Awesome. Well, thank you. Thanks, everybody.

Thank you. Travel safe, Sarah.

Bye-bye.

Bye-bye.